UK inequality 'fallen since credit crunch'

Salary differences smaller than decade ago, but regional gaps growing, says Institute for Fiscal Studies

City of London seen from Whitechapel
(Image credit: Peter Macdiarmid/Getty Images)

Higher employment rates and lower real earnings since the credit crunch have smoothed out UK income inequality, but the economy is still regionally "lopsided", a new report says.

According to the Institute for Fiscal Studies (IFS), London has the highest level of income inequality, although it has decreased since 2007-08, helped by a five per cent increase in employment and a ten per cent fall in median real earnings.

In the UK as a whole, the employment rate rose by 1.5 per cent, but median earnings were down by five per cent

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However, the averages conceal significant regional differences. Incomes in the capital and the south-east of England are 25 per cent higher than in the West Midlands, the UK's poorest region, followed by Wales and the north-west. Over the past 40 years, the gap between the Midlands and the south has grown.

Campbell Robb of the Joseph Rowntree Foundation, which funded the study, called on the government to redress regional differences.

"These alarming figures highlight how far behind some parts of the UK have fallen, with millions of people seeing their incomes stagnate or even worse decline," he told The Independent. "Rebalancing our lopsided economy must be a priority if we are to create a country that works for all."

Average median income growth has also been "extremely slow", the IFS said, at only 3.37 per cent higher in 2015-16 than prior to the recession. Absolute poverty levels hardly improved at all.

"This lack of progress is historically unusual and reflects the more general lack of real income growth," it added.

Stronger-than-expected employment growth has eased the pain somewhat, boosting the least well-off households the most, the BBC reports.

A Treasury spokesman told Sky News: "We are building an economy that works for everyone by sharing prosperity and opportunity throughout the UK so nobody is held back because of where they come from."

Others said the findings showed the opposite. Liberal Democrat welfare spokesman Stephen Lloyd said: "This report shows for the first time we are creating geographical ghettos of poverty that are trapping a generation of people and their children."

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